Unfortunately for some shareholders, WM Technologies (NASDAQ: MAPS) shares have fallen 38% over the past three decades, extending the recent pain. The latest drop has left shareholders with a disastrous 12 months, during which they lost 90%.
WM Motor’s price-to-earnings ratio (or “P/E”) of 4.2x may make it now look like a strong buy compared to the U.S. market, where roughly half of these companies trade at high multiples P/E ratios of 15 times or even higher than 28 times are also common. However, we need to dig a little deeper to determine whether a significant reduction in the P/E ratio is justified.
Despite the recent earnings growth the market has experienced, WM Motor’s earnings have regressed, and it’s not good. It appears that many expect the poor earnings performance to continue, dampening the price-to-earnings ratio. If this is the case, it may be difficult for existing shareholders to get excited about the future direction of the stock price.
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If you want to see what analysts are forecasting for the future, you should check out our free WM Technical Report.
Is growth matched by low P/E ratios?
There is an inherent assumption that a company’s P/E ratio should lag the market well, such as WM Technology’s P/E ratio to be considered reasonable.
If we look back at last year’s earnings, the company’s profits fell to a dismal 34%. Earnings per share in general, at least, haven’t quite regressed three years ago, thanks to early growth. So, it’s fair to say that the company’s recent earnings growth has not been consistent.
Looking ahead, earnings per share are expected to decline by 25% annually over the next three years, according to the six analysts who follow the company. That’s not great when other markets are expected to grow at 9.4% a year.
Given this, it’s understandable that WM Tech’s price-to-earnings ratio is lower than most other companies. However, shrinking earnings is unlikely to lead to a stable P/E ratio over the long term. If the company does not improve profitability, the P/E ratio could fall to even lower levels.
Shares of WM Technology have plummeted, and its price-to-earnings ratio is now low enough to bottom. While the P/E ratio shouldn’t be the deciding factor in whether or not you buy a stock, it’s a very capable barometer of earnings expectations.
As we suspected, our inspection of WM Tech’s analyst forecasts shows that its low P/E ratio is behind its shrinking earnings outlook. For now, shareholders are embracing the low price-to-earnings ratio as they acknowledge that future earnings may not bring any surprises. Unless these conditions improve, they will continue to form barriers around these levels.
Before proceeding to the next step, you should understand 4 Warning Signs of WM Technology (1 is a bit off-putting!) We found out.
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